08 February 2022

FCA: Enhancing the UK’s capital markets – The FCA’s role and priorities

Highlights

• Her Majesty’s Treasury is consulting on giving the FCA significant new rulemaking powers, through the Future Regulatory Framework (FRF)
• The FRF is a critical opportunity to adapt the regulatory system so that it continues to enhance the attractiveness of UK capital markets
• The UK already boasts globally recognised expertise in creating sustainable investment propositions, and the FCA has a role in supporting that.

I’m pleased to be addressing this City and Financial Global summit today with the opportunity to discuss the future of UK financial services regulation and in particular the opportunities that lie ahead for financial markets. This is a topic which is really important to us in our role as the UK’s conduct regulator (not forgetting that we are Europe’s largest prudential regulator by number of firms).  

Before I dive in, I’d like to introduce myself. For anyone who doesn’t know me, I am Sarah Pritchard, the FCA’s Executive Director for Markets. I have overall responsibility for the FCA’s market integrity objective and I co-lead the FCA’s Supervision, Policy and Competition Division with Sheldon Mills. I have had a mixed career across the public and private sector, having worked alongside the FCA as a government partner, been regulated by the FCA while working in industry, and dealt with the FCA as a lawyer in private practice earlier in my career.   

All of that experience has shown me how important it is for the regulator to set out clear expectations and outcomes against which progress can be measured. Alongside that sits the importance of partnering with industry, other regulators and government partners when setting the policy framework and rules which set the standards for the UK. 

Our statutory objectives are to protect consumers, support market integrity and promote competition in the interests of consumers – and in doing so we have 2 key tasks – to make markets work better and to stop and prevent serious misconduct which leads to harm.  

This morning I will speak briefly about the FCA’s priorities, the Future Regulatory Framework (FRF) and what you can expect to see from us in the months ahead.

How the FCA is transforming 

Last July our CEO, Nikhil Rathi, FCA commits to being a more innovative, assertive and adaptive regulator">set out our vision for change and the future of the FCA. We want to become a more innovative, assertive, and adaptive regulator. One that is data-led. One that partners more effectively with others to deliver the outcomes that are needed to protect consumers and promote market integrity. And one that is much more outcomes focused – we want to be a regulator that thinks clearly about the outcomes we are seeking to achieve when setting the regulatory framework, and one that monitors progress.  

To be innovative and adaptive, we know that we will need to stay abreast of the changes in the world around us – particularly changes driven by technology, innovation, and climate change - and reflect those considerations in the regulatory agenda. In doing so, we will need to work with government partners, other regulators and industry (both through our statutory panels, individually and via trade associations) to inform our rules, so that we can ensure that they will deliver the outcomes that are needed to protect consumers, and ensure a well-functioning market. 

Since we set out our vision 6 months ago I hope you will have seen some signs that we are already doing this: 

• We are embracing innovation and are seeking to support it too. We have announced that we will be making the Regulatory Sandbox permanent in the FCA so that we can offer innovative services to enable new market entrants a chance to test out their ideas in real world scenarios, providing an incubator for firms and products to develop. In October we finalised rules for a new type of fund designed to invest efficiently in long term assets – setting rules for a Long Term Asset Fund which should help support investment in assets such as infrastructure and private equity. And in December, we confirmed a series of rule changes to the listings regime, so that UK public markets remain an attractive and trusted place to list companies – supporting growth and innovation.  
• We are being more assertive. We have confirmed further changes to our decision making processes, moving decisions into the line, to enable us to intervene more quickly and tackle harm when we see it. We are publishing more consumer warnings. We have had our first successful prosecution under the Money Laundering Regulations against NatWest Bank, for failing to have adequate Money Laundering systems and controls. And we continue to take a tough approach at the gateway for cryptoasset firms which need registration under the Money Laundering regime – with those firms so far falling short at a significantly higher rate than others. We are running a 'FCA reminds firms to regularly review regulatory permissions">Use it or Lose it' pilot, seeking to remove permissions from those firms who do not use them. 
• Finally, we are continuing to adapt, both ourselves and to support a changing marketplace, and to lead the regulatory agenda in key areas. We are proposing to introduce new rules to embed diversity and inclusion across financial services and in listed markets. We have consulted on the sustainability labelling of investment products, so that investors can be helped to make more informed decisions. We have taken steps to implement the recommendations of the Taskforce for Climate Related Financial Disclosures.   

It is fair to say people do not typically think of a regulator as innovative or particularly adaptive – but that is our vision. In a recent speaking event I did I talked about 'keeping things simple' – this prompted a number of sidebar comments saying that this was refreshing but unusual for a regulator. But our rather simply expressed ambition of being innovative, assertive and adaptive means challenging ourselves to do things differently. I hope you have seen us seeking to do so in the last few months. From the outside, I would welcome your views on whether the FCA you interact with looks and feels different in the months ahead.  

The Future Regulatory Framework 

I’m grateful to Her Majesty’s Treasury for setting out the government’s vision for the Future Regulatory Framework. The FCA welcomes the government’s consultation- which as you know includes a proposal to transfer significant pieces of onshored legislation into our Handbook. The consultation presents an opportunity to create a rulebook which meets the specific needs of the UK market, while still remaining anchored by the high international standards which the UK has done so much to shape. 

As I mentioned earlier, our statutory objectives are to promote market integrity, protect consumers, and ensure competition in the interests of consumers. The FRF proposals would give us, and the Prudential Regulatory Authority (PRA), a secondary objective that will require us to operate in a way that facilitates the long-term growth and international competitiveness of the UK economy – growth that should be consistent with the government’s commitment to achieve a net zero economy by 2050.  

We welcome the published proposals and the intent to have a regulatory framework that supports and maintains the UK's status as a leading financial centre - I hope you will have seen some of the work that we are already doing - for example our work on primary market effectiveness and listing reform, leadership on ESG, and continuing work on open banking.   

The FCA has a leading reputation for supporting innovation and we take seriously the important role we have to play in the continued future success and integrity of the UK's financial services markets. A secondary competitiveness objective for UK financial regulators strikes an appropriate balance that recognises the important role the FCA plays in supporting long-term growth of the UK economy, as we continue to deliver on our existing core strategic objectives. 

In this vein, the FRF is a critical opportunity to adapt the regulatory system so that it continues to enhance the attractiveness of UK capital markets - supporting our position as a world-leading place for savers to invest and for businesses to raise capital. 

As the FCA gains new responsibilities for rule-making, we also recognise that accountability is an important topic. We will continue to be guided by our statutory objectives, subject to governance and, of course, accountable to Parliament....

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